Heloc issues LLC

[Aaron Hill]

I would love advice from the community on this issue. My wife and I recently inherited a home, which we took possession of earlier this year. We quit claimed the deed into our LLC for liability etc. The plan is to use the heloc to purchase additional properties, and basically brrrr and pay back the balance - then repeat.

What I didn't realize is how difficult it is to find a business heloc. I have searched and filled out endless online forms only to have lenders offer me unsecured loans or other products, but not a heloc. We also tried getting a personal heloc, but can't do that on a property held in an LLC. So before I transfer ownership back and start a seasoning period, I thought I would ask if there were any solutions I am not finding.

Thanks!   Aaron Hil

[Kevin Sobilo]

@Aaron Hill, a few thoughts:

1. Go to small local/regional banks NOT national ones. National banks typically do not offer products that suite your needs here.

2. When your LLC takes a loan, expect as members to personally guarantee the debt. Its similar to being a cosigner. Your LLC has no "business" other than the asset(s) it owns. So, you will need to stand behind the LLC's debt even though the debt will be in the LLC's name and not on your credit report.

3. HELOCs are usually variable rate and there may be yearly fees associated with maintaining the HELOC. So, factor that into your thinking about whether its the right choice for you.

4. Consider a cash-out refi as that will be easier to find. Many lenders, even small ones, don't offer HELOCs on rental properties like yours. A cash-out refi is easier to find.

5. I assume your wish to use a HELOC is to avoid paying interest when you are not actively rehabbing a BRRRR. If you use a cash-out refi, you can deploy the money elsewhere to partially offset that interest if it will be sitting idle a while. A short term CD or something like that.